Chapter 8 Flashcards
(105 cards)
1
Q
860) Corporate strategy is focused solely on determining the geographic locations in which the firm should compete.
⊚ true
⊚ false
A
1) FALSE
2
Q
861) All businesses are motivated by a need to grow.
⊚ true
⊚ false
A
2) FALSE
3
Q
862) The internal and external costs associated with an economic exchange are known as interaction costs.
⊚ true
⊚ false
A
3) FALSE
4
Q
863) Firms are more capable than markets at coordinating highly complex tasks, while markets are more capable of providing high-powered incentives for entrepreneurship.
⊚ true
⊚ false
A
4) TRUE
5
Q
864) Managers have exactly two choices when determining the boundaries of the firm: produce goods and services in-house (“make”) or purchase them externally (“buy”).
⊚ true
⊚ false
A
5) FALSE
6
Q
865) A firm stops purchasing components from suppliers and starts producing them in-house.
This is known as forward vertical integration.
⊚ true
⊚ false
A
6) FALSE
7
Q
866) When outsourced activities take place outside the home country, it is known as offshoring.
⊚ true
⊚ false
A
7) TRUE
8
Q
867) A firm follows a related diversification strategy when it derives less than 25 percent of its revenues from a single business activity and obtains revenues from other lines of business linked to the primary business activity.
⊚ true
⊚ false
A
8) FALSE
9
Q
868) The most challenging diversification strategy is likely to be one that combines new core competencies with new and emerging markets.
⊚ true
⊚ false
A
9) TRUE
10
Q
869) Firms that pursue extremely high or extremely low levels of diversification perform better than those that pursue moderate levels of diversification.
⊚ true
⊚ false
A
10) FALSE
11
Q
870) To gain and sustain competitive advantage, any corporate strategy must extend far beyond a firm’s business strategy.
⊚ true
⊚ false
A
11) FALSE
12
Q
871) A firm that pursues unrelated diversification is often unable to create additional value.
⊚ true
⊚ false
A
12) TRUE
13
Q
872) Hector, owner of Hector’s Trucking, wants to figure out if his business should diversify its range of services to gain an advantage over competitors. Business consultants have advised Hector to focus on the key question of where to compete. He would therefore be considering which of the following?
A) his functional strategy
B) his transaction costs strategy
C) his corporate strategy
D) his external transaction costs strategy
A
13) C
14
Q
873) Siobhan’s firm focuses only on design, marketing, and retailing, and it outsources all its other value chain activities. This firm has
A) a high degree of vertical integration.
B) fully integrated all aspects of its value chain.
C) a low degree of vertical integration.
D) achieved economies of scale.
A
14) C
15
Q
874) Billy is the founder and CEO of Billy’s Kicks, a soccer ball retailer. He decides to purchase a synthetic rubber manufacturing firm so he can create his own soccer balls and sell them nationally in his retail stores. Billy will engage in
A) forward vertical integration.
B) backward vertical integration.
C) horizontal integration.
D) differentiation.
A
15) B
16
Q
875) Jill is the CEO of Notes Etc., a stationery manufacturer. She decides to open up a retail store to sell her products directly to consumers instead of just selling wholesale to retailers. To do this, Jill will need to engage in
A) forward vertical integration.
B) backward vertical integration.
C) horizontal integration.
D) differentiation.
A
16) A
17
Q
876) Sanjay, owner of WashTubs, a washing machine company, is looking for an alternative to vertical integration. He decides to manufacture some of his own machine parts while keeping a few key suppliers in his industry value chain. This is known as
A) a balanced scorecard.
B) forward vertical integration.
C) strategic offshoring.
D) taper integration.
A
17) D
18
Q
877) A company that engages in strategic outsourcing reduces its level of
A) vertical integration.
B) taper integration.
C) vertical market failure.
D) credible commitment.
A
18) A
19
Q
878) Many financial service firms, IT firms, and health-care companies are among the most active when it comes to, which occurs when value chain activities are taken care of outside the home country of the firm.
A) strategic outsourcing
B) procurement
C) offshore outsourcing
D) diversification
A
19) C
20
Q
879) Since Coca-Cola focuses on selling only non-alcoholic beverages, a low degree of product diversification, we would conclude that it competes in a(n)market versus its main competitor PepsiCo, which sells a wide variety of products.
A) single product
B) multiple product
C) related diversification
D) unrelated diversification
A
20) A
21
Q
880) Because Facebook receives almost all of its revenues from online advertising, we would conclude that it would be characterized as a(n)firm, which has the lowest levels of corporate diversification.
A) single business
B) dominate business
C) related diversification
D) unrelated diversification
A
21) A
22
Q
881) Jermaine’s Choppers sells Chandler Dogies, a special type of motorcycle. The business generates roughly 80 percent of its revenues from selling these motorcycles and about 20 percent on motorcycle repair and service. Jermaine’s Choppers would be classified as
afirm.
A) single business
B) dominant business
C) related diversification
D) unrelated diversification
A
22) B
23
Q
882) When examining the core competence–market matrix, the most challenging diversification strategy occurs when firms attempt to combinewith. If done successfully, the firm could have the potential for “mega-opportunities” that may lead to competitive advantage.
A) new core competencies; new markets
B) new core competencies; existing markets
C) existing core competencies; existing markets
D) existing core competencies; new markets
A
23) A
24
Q
883) Salesforce is one of the leading providers of platform as a service (PaaS) tools and services. It developed a new competency in delivering software development that allows its customers to better customize their future needs. Viewing this through the lens of the core competence–market matrix, which of the following four options below does Salesforce best exemplify?
A) Salesforce leveraged existing core competencies to improve its current market position.
B) Salesforce built new core competencies to protect and extend its current market position.
C) Salesforce redeployed and recombined existing core competencies to compete in markets of the future.
D) Salesforce built new core competencies to create and compete in markets of the
future.
A
24) D
25
884) Projecta is a publicly traded company and a highly diversified firm. But Projecta’s most recent stock price is valued less than the sum of all its individual business units. Projecta is most likely experiencing a
A) diversification discount.
B) diversification premium.
C) two for one split.
D) shareholder rights plan.
25) A
26
885) Danke is a diversified firm that creates more value than the cost that it incurs. As a result, it is experiencing a diversification premium in its stock price. Danke is able to accomplish all of the following except
A) provide economies of scale, which reduces Danke’s costs.
B) exploit economies of scope, which increases Danke’s value.
C) increase its costs but maintain its current stock price.
D) reduce Danke’s costs and increase value.
26) C
27
886) Anheuser-Busch InBev sold Busch Entertainment, its theme park unit that owns SeaWorld and Busch Gardens, to a group of private investors. This strategic move allows InBev to focus more fully on its core business of brewing and distributing beer across the world. This is an example of
A) restructuring.
B) corporate diversification.
C) a business level strategy.
D) the core competence–market matrix.
27) A
28
887) Haoyu plans to restructure the portfolio of all his firm’s strategic business units, similar to how an investor might change a portfolio of stocks. To do this, Haoyu will more than likely employ which corporate planning tool?
A) value chain analysis
B) Boston Consulting Group (BCG) growth-share matrix
C) diversification premium
D) VRIO
28) B
29
888) Amerie is the strategic business unit (SBU) leader in charge of manufacturing men’s bow ties. While the market Amerie’s firm competes in is low growth, its SBU’s earnings and cash flow are both ranked high and stable. When examining Amerie’s SBU through the Boston Consulting Group (BCG) growth-share matrix lens, we can conclude that her SBU would be classified as a
A) star.
B) dog.
C) question mark.
D) cash cow.
29) D
30
889) Rashad is the strategic business unit (SBU) CEO in charge of manufacturing stereo speakers for computers and laptops. His SBU earnings and cash flow are both low and unstable. Which of the following strategies should Rashad enact if examining his SBU through the Boston Consulting Group (BCG) growth-share matrix lens?
A) hold
B) invest for growth
C) harvest and/or divest
D) allocate more resources for manufacturing
30) C
31
890) BookWizard, a large online and offline book-selling company, decides to enter the college textbook market. Its goal is to create cobranded. university-specific websites that offer textbooks; clothing and accessories such as logo T-shirts and sweaters, baseball hats, and mugs; and a full range of peripheral items like notebooks, pens, art supplies, and the like. This scenario shows BookWizard’s pursuit of
A) geographic diversification.
B) product diversification.
C) vertical integration.
D) horizontal integration.
31) B
32
891) Decisions relating to the question of what stages of the industry value chain to participate in determine a firm’s
A) level of diversification.
B) geographic scope.
C) vertical integration.
D) competitive strategy.
32) C
33
892) Decisions relating to the range of products and services a firm will offer determine the firm’s
A) level of diversification.
B) geographic scope.
C) vertical integration.
D) absorptive capacity.
33) A
34
893) Which of the following stakeholders of a company would most likely be responsible for formulating a corporate strategy?
A) first-line employees
B) creditors
C) chief executive officer
D) middle manager
34) C
35
894) Isaac has been named CEO of a start-up online educational company. Isaac and other strategic leaders of the company will be setting the firm’s corporate strategy. Out of the following decisions, which will Isaac and his associates most likely make first?
A) whether to pursue a differentiation or cost-leadership strategy
B) what range of products to offer
C) how to achieve the highest levels of customer satisfaction
D) which customer segments to target
35) B
36
895) The managers at Acme Corporation decided that their firm needed to diversify because of overall falling sales and lower performance in one sector. How does diversifying compensate for the declining performance in this sector?
A) by having higher performance in another sector
B) by sharing their market power
C) by increasing the firm’s risk in another sector
D) by motivating managers
36) A
37
896) There are many reasons why firms need to grow. Which of the following reasons is strongly influenced by economies of scale?
A) increasing profits
B) lowering costs
C) reducing risk
D) motivating managers
37) B
38
897) What is the name of the situation that can arise when strategic leaders pursue their own interests in conflict with the firm’s goals?
A) opportunism
B) principal-agent problem
C) risk assessment
D) enforcement of contracts
38) B
39
898) Soylent Corporation is a major nutritional supplement chain. Its managers are motivated to grow the firm in order to increase their market power and change the industry structure in their favor. Which of the following strategies is most associated with their motive for growth?
A) employing celebrity spokespeople
B) implementing automated soy-making machinery
C) purchasing competitors
D) increasing executive salaries
39) C
40
899) Which of the following is an example of an external transaction cost?
A) the cost of setting up a production unit
B) the cost of searching for a contract manufacturer
C) the cost of recruiting and retaining employees
D) the cost of maintaining plant and machinery
40) B
41
900) Which of the following is an example of an internal transaction cost?
A) the cost of searching for a contract manufacturer
B) the cost of signing a contract with a supplier
C) the cost of buying raw materials
D) the cost of maintaining a production unit
41) D
42
901) Tree Corporation recently acquired a smaller competitor, Branch and Associates, which specializes in issues not previously covered by Tree Corporation, such as intellectual property cases. Given the increase in the firm’s size and complexity, it is likely that its internal transaction costs will
A) be eliminated.
B) decrease.
C) transition to external transaction costs.
D) increase.
42) D
43
902) A primary advantage of organizing economic activity within firms is the
A) ability to coordinate highly complex tasks to allow for specialized division of labor.
B) low administrative costs because of reduced bureaucracy.
C) eradication of the principal-agent problem.
D) high-powered incentive to work as salaried employees for an existing firm.
43) A
44
903) Cumberland Computers will be buying processing chips needed for its laptops and tablets from external suppliers instead of manufacturing them in its own facilities. How will this decision affect the firm?
A) The firm will have more flexibility in purchasing and comparing prices of goods and services.
B) The firm’s administrative costs will be low because of necessary bureaucracy.
C) The firm will be protected against the principal-agent problem.
D) The firm will have high-powered incentives, such as hourly wages and salaries.
44) A
45
904) Managers in a firm hired to improve the firm’s profitability and ultimately the shareholders’ value will add to the overall costs if they pursue their own self-interests. What does this best illustrate?
A) diseconomies of scale
B) principal-agent problem
C) experience-curve effects
D) information asymmetries
45) B
46
905) is best described as a situation in which one party possesses private information and is therefore better informed than another party.
A) Information governance
B) Information asymmetry
C) Information deregulation
D) Information piracy
46) B
47
906) Real estate agent Jensen sold first-time homebuyer Mitch a house. On the surface, the house appeared to be in good shape, but it turns out it has hidden structural issues that will cost a lot to fix. Mitch is angry that Jensen withheld this key information. Which of the following does this scenario best illustrate?
A) learning-curve effect
B) principal-agent problem
C) experience-curve effect
D) information asymmetry
47) D
48
907) Massive Dynamic Computers sources the components for its laptops from various suppliers on the market. The firm pays $100 for processors, $35 for disk drives, $50 for screens, $10 for memory, and $40 for graphics and wireless internet cards. Massive Dynamic has determined that it would cost $200 per unit to produce all of the necessary components in its in-house manufacturing facility. In this scenario, Massive Dynamic should
A) continue to outsource production.
B) vertically integrate.
C) exit the laptop industry.
D) diversify its activities.
48) B
49
908) A drawback of short-term contracting as an alternative to making a component in-house is that
A) it is the most-integrated alternative to performing an activity so the principal company has no control over the agent.
B) the supplying firm has no incentive to make any transaction-specific investments to increase performance or quality.
C) it fails to allow a long planning period that individual market transactions provide.
D) the buying firm cannot demand lower prices due to the lack of a competitive bidding process.
49) B
50
909) are best described as voluntary arrangements between firms that involve the sharing of knowledge, resources, and capabilities with the intent of developing processes, products, or services to lead to competitive advantage.
A) Embargos
B) Cartel agreements
C) Strategic alliances
D) Corporate acquisitions
50) C
51
910) Initech developed a superior touch screen technology for tablet computers that enabled multiple users to operate the screen at the same time. The technology was leased to Accent Technologies, a consumer electronics company, for five years. Which of the following alternatives to integration does this best illustrate?
A) licensing
B) franchising
C) crowdsourcing
D) bootlegging
51) A
52
911) Fast-food chain Taco Trio operates through a business model in which individuals can buy the rights to set up Taco Trio restaurants and sell the company’s food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the individual restaurants have to offer a menu approved at Taco Trio headquarters, use the same interior color scheme and layout as the flagship restaurant, and maintain high-level customer service. Which of the following alternatives to integration does this best illustrate?
A) crowdsourcing
B) franchising
C) credit rationing
D) bootstrapping
52) B
53
912) Wenonah Capital Partners asked one of its partners, a research and development (R&D) firm, to concentrate on developing new medications for Parkinson’s disease. But the project requires a huge capital investment, and the R&D partner has some reservations about Wenonah’s long-term commitment to the project. To prove its commitment, Wenonah pledges an investment of $200 million over five years. This investment by Wenonah in the project will result in a
A) cartel.
B) credible commitment.
C) corrective action.
D) parent–subsidiary relationship.
53) B
54
913) Openlane and Yearin Technologies have together invested and created a new organization, Globex Corporation, to focus on developing diagnostic devices. Through this new firm, both companies are attempting to combine their core competencies to innovate and reduce their risks associated with transaction-specific investments. However, the new organization operates independent of Openlane and Yearin Technologies. Which of the following alternatives to integration does this scenario best illustrate?
A) a joint venture
B) a franchisee
C) a licensing contract
D) a corporate acquisition
54) A
55
914) How is an equity alliance different from a joint venture?
A) An equity alliance involves ownership that facilitates transaction-specific ventures; a joint venture involves taking ownership by buying stock.
B) An equity alliance involves taking ownership in a partner; a joint venture involves two or more entities owning a firm.
C) An equity alliance involves taking ownership in a partner; a joint venture involves taking ownership by buying stock.
D) An equity alliance involves partners contributing equity to a joint venture; a joint
venture involves two or more entities owning a firm.
55) B
56
915) U.S.-based consumer electronics corporation DGM owns a smaller company in Taiwan where most of DGM’s cell phone technology is made before being released worldwide.
Which of the following alternatives to integration does this best illustrate?
A) venture capitalism
B) parent–subsidiary relationship
C) joint venture
D) franchising
56) B
57
916) is best described as a firm’s ownership of its production of needed inputs or of the channels by which it distributes its outputs.
A) Venture capitalism
B) Bootlegging
C) Vertical integration
D) Crowdsourcing
57) C
58
917) Each stage of the vertical value chain typically represents a distinct _ in which a number of different firms are competing.
A) industry
B) functional department
C) economy
D) customer segment
58) A
59
918) Condax Electronics relied on a large chain of consumer electronics stores to sell its tablet computers, cell phones, and televisions and also to provide customer service and technical support. However, that retailer outsourced its service departments, and customers began to complain that they could not get reliable tech support for Condax products. In response, Condax Electronics set up its own tech support department, and it also began to investigate opening its own brand-based retail stores. What does this scenario best illustrate?
A) crowdsourcing
B) new product development
C) forward vertical integration
D) conglomerate diversification
59) C
60
919) Which of the following best illustrates forward vertical integration?
A) A firm that manufactures and sells car engines to major automobile companies launches its own line of cars.
B) A chain of ice cream parlors launches a brand of toys and accessories for children.
C) A multinational coffee chain sources its coffee beans from plantations in Brazil and Vietnam.
D) A designer shoe company that previously purchased leather from external suppliers
establishes its own leather tannery.
60) A
61
920) Nguyen Autos currently sources components such as airbags, upholstery, and brake pads from various suppliers in the industry value chain. In order to lower costs and reduce the risk of interruptions in the supply of components, Nguyen should pursue
A) product diversification.
B) forward integration.
C) backward integration.
D) geographic diversification.
61) C
62
921) Which of the following best illustrates physical-asset specificity?
A) a unique training program developed in an organization
B) a ship container designed to carry more than the average load of iron ore
C) a generic machine that can be used to churn different mixtures
D) a machine solely designed to give a candy its trademarked shape
62) D
63
922) Which of the following best illustrates site specificity?
A) equipment necessary for mining bauxite and aluminum smelting
B) bottling machinery to manufacture bottles with trademarked shapes
C) investment made in human capital to master procedures of a specific organization
D) investment made to train employees to operate computers
63) A
64
923) Which of the following is a drawback of vertical integration?
A) It increases the difficulty of securing critical supplies.
B) It impedes scheduling and planning.
C) It increases the potential of legal repercussions.
D) It impedes investments in special assets.
64) C
65
924) VineRipe Tomato makes organic ketchup. To promote its products, this firm decided to make bottles in the shape of tomatoes. To accomplish this, VineRipe worked with its bottle manufacturer to create a set of unique molds for its bottles. Which of the following specialized assets does this example demonstrate?
A) site specificity
B) research specificity
C) physical-asset specificity
D) human-asset specificity
65) C
66
925) Firms that use taper integration also use integration when they rely on outside- market firms for some of their supplies.
A) backward vertical
B) forward vertical
C) backward horizontal
D) forward horizontal
66) A
67
926) Doncon Guitars is interested in pursuing backward integration to take greater ownership of the extraction of raw materials and production of components used in its signature line of guitars. Although this approach would lower the overall cost of producing a guitar, the costs associated with producing electronic pickups for sound amplification are far greater than those associated with sourcing pickups from a reliable supplier. Which of the following approaches is likely to produce superior results?
A) Invest in vertical integration despite the cost of producing pickups.
B) Abandon the idea of vertical integration entirely.
C) Pursue taper integration.
D) Introduce a budget line of guitars to diversify the firm’s offerings.
67) C
68
927) Churchill-Perez International is a large conglomerate that procures a few component parts from external suppliers; it also owns subsidiaries that manufacture key raw materials. The firm does not solely depend on outside distributors to reach its customers. In fact, it has retail stores in the United States, Canada, and the United Kingdom that feature its products. In this scenario, which of the following alternatives to vertical integration is Churchill-Perez applying?
A) concentric integration
B) taper integration
C) horizontal integration
D) conglomerate integration
68) B
69
928) DreamHome operates in a number of countries and sells a wide variety of home goods, from garden furniture to kitchenware, to achieve continuous growth. From this data, we can conclude that DreamHome has been involved in
A) product-market diversification.
B) process diversification.
C) strategic outsourcing.
D) lean manufacturing.
69) A
70
929) While KFC focuses on international markets, its competitor, Chick-fil-A, focuses on the domestic U.S. market. What is the reason behind this strategic difference?
A) KFC has more financial resources than Chick-fil-A since it is a publicly traded stock company.
B) Chick-fil-A has a larger customer base and number of outlets in the U.S. market than its competitor KFC.
C) KFC wants to follow a differentiation strategy, and Chick-fil-A wants to pursue a cost-leadership strategy.
D) Chick-fil-A is part of a large conglomerate, whereas KFC has more flexibility to
pursue a geographic diversification strategy.
70) A
71
930) J-Texon Manufacturing is a large conglomerate that operates only in its home country.
The company competes in industries like the consumer electronics, health care, hotel, airlines, education, and steel industries. Which of the following diversification strategies does this best illustrate?
A) process diversification
B) product diversification
C) geographic diversification
D) market diversification
71) B
72
931) Spain-based Coche Azul, a high-end automaker, has recently started selling its cars through company-owned outlets in major cities in Eastern Europe. Which of the following types of diversification strategies is Coche Azul pursuing?
A) product diversification strategy
B) process diversification strategy
C) product-market diversification strategy
D) geographic diversification strategy
72) D
73
932) Singletechno Industries, a large U.S.-based conglomerate, competes in the hospitality, education, telecommunications, entertainment, airlines, and chemical industries. It currently operates in about 30 nations, and is planning to expand its portfolio by investing in rapidly developing countries. Which of the following strategies is Singletechno Industries pursuing?
A) zone pricing
B) niche marketing
C) product-market diversification strategy
D) process diversification strategy
73) C
74
933) Sonron Corporation generates 85 percent of its annual revenues by manufacturing luxury cars. The company derives 15 percent of its annual revenues by selling sports merchandise such as apparel, shoes, and other accessories under the same brand name. Which of the following terms best describes Sonron Corporation?
A) a conglomerate
B) a subsidiary
C) a dominant-business firm
D) a single-business firm
74) C
75
934) When executives of a firm consider business opportunities only where they can leverage their existing competencies and resources, we can conclude that the firm is using
A) related-constrained diversification.
B) related-linked diversification.
C) strategic outsourcing.
D) offshore outsourcing.
75) A
76
935) Silis Autos is known for its affordable and reliable brand of consumer vehicles. Because its shareholders expect to see an improved rate of growth in the coming years, Silis’s executives have decided to diversify the company’s range of products so that at least 40 percent of the firm’s revenue is generated by new business units. However, the company’s resources, capabilities, and competencies are limited to producing other forms of motorized vehicles, such as motorcycles and all-terrain vehicles (ATVs). Which type of corporate diversification strategy should Silis pursue?
A) dominant business
B) related-constrained
C) related-linked
D) unrelated
76) B
77
936) Plexzap Products started as a luxury brand for designer apparel. Soon, the company expanded by launching its own line of premium perfumes, watches, bags, and home furnishings. This expansion allowed the businesses under the company to share a few of the common competencies in products, services, technology, and distribution. Which of the following corporate strategies is Plexzap pursuing in this scenario?
A) taper integration strategy
B) niche marketing strategy
C) related-constrained strategy
D) related-linked strategy
77) D
78
937) Finjob is following a related-linked diversification strategy, and Rangreen is following a related-constrained diversification strategy. How do the two firms differ from each other?
A) Rangreen Inc. generates 70 percent of its revenues from its primary business, while Finjob generates only 10 percent of its revenues from its primary business.
B) Rangreen pursues a backward diversification strategy, while Finjob pursues a forward diversification strategy.
C) Finjob will share fewer common competencies and resources between its various businesses when compared with Rangreen
D) Finjob pursues a differentiation strategy, and Rangreen pursues a cost-leadership
strategy, to gain a competitive advantage.
78) C
79
938) A firm follows a(n) when less than 70 percent of its revenues come from a single business and there are few, if any, linkages among its businesses.
A) related-constrained strategy
B) unrelated diversification strategy
C) differentiation strategy
D) dominant-business strategy
79) B
80
939) Funholding is a large multinational company active in the petroleum, capital market, chemicals, steel, beverages, hospitality, airlines, automobiles, and consumer electronics industries. The company has multiple brands and a large product portfolio under its banner. Which of the following terms would best describe this company?
A) a flagship brand
B) a single-business firm
C) a dominant-business firm
D) a conglomerate
80) D
81
940) How does a conglomerate benefit from following an unrelated diversification strategy?
A) The conglomerate can solely depend on its primary business activity for a major portion of its revenues.
B) The conglomerate can share most of its competencies in products, services, technology, or distribution between all its businesses.
C) The conglomerate can overcome institutional weaknesses, such as a lack of capital markets, in emerging economies.
D) The conglomerate can limit the learning- and experience-curve effects it faces.
81) C
82
941) The Tata group of India, Warren Buffet’s Berkshire Hathaway, and the Japanese Yamaha group have several strategic business units under one corporate umbrella and are pursuing an unrelated diversification strategy. We would refer to these businesses as
A) differentiators.
B) conglomerates.
C) internal competitors.
D) vertically integrated.
82) B
83
942) Why is following an unrelated diversification strategy especially advantageous in an emerging economy?
A) It allows the conglomerate to overcome institutional weaknesses in emerging economies.
B) It allows the conglomerate to form a monopoly in emerging economies.
C) It allows the conglomerate to use well-defined legal systems in emerging economies.
D) It allows the conglomerate to take advantage of strong capital markets in emerging economies.
83) A
84
943) Plexzap Sodas has been a market leader in the soft drink industry for several decades. However, its market research shows that consumer tastes have begun to shift to sugar-free flavored seltzer waters, a product that Plexzap is capable of producing with minimal changes to its facilities and production processes. Based on your knowledge of the core competence– market matrix, which diversification strategy should Plexzap pursue?
A) Leverage existing core competencies to improve current market position.
B) Build new core competencies to protect and extend current market position.
C) Redeploy and recombine existing core competencies to compete in markets of the future.
D) Build new core competencies to create and compete in markets of the future.
84) C
85
944) The core competency of Newex Motors is the fuel-efficient engine found in its cars. These engines are developed and built in-house. The company realizes that the growing demand for “green” vehicles has created a new market opportunity. Thus, it uses its existing technology to develop an engine that improves the fuel efficiency of recreational motorhomes. In this scenario, Newex Motors is
A) leveraging existing core competencies to target the chasm between the early adopter and early majority market segment.
B) redeploying and recombining existing core competencies to compete in future markets.
C) building new core competencies to create and compete in future markets.
D) building new core competencies to protect and extend current market position.
85) B
86
945) Betasoloin Corp. is an automobile company whose core competency lies in manufacturing petrol- and diesel-based cars. The company realizes that more of its potential customers are switching to electric cars. The R&D department of the company acquires competencies in developing electric cars and launches its first hybrid car, which uses both gas and electricity. In this scenario, Betasoloin is primarily
A) leveraging new core competencies to improve current market position.
B) redeploying existing core competencies to compete in future markets.
C) unlearning existing core competencies to create and compete in markets of the future.
D) building new core competencies to protect and extend current market position.
86) D
87
946) Coca-Cola was primarily known for its core competencies in marketing, bottling, and distributing aerated drinks. However, with the success of Gatorade, Coca-Cola developed competencies in the development and marketing of its own sports drink, Powerade. Which of the following is true of Coca-Cola?
A) It is leveraging existing core competencies to improve current market position.
B) It is building new core competencies to protect and extend its current market position.
C) It is redeploying and recombining existing core competencies to compete in markets of the future.
D) It is targeting the chasm between the early adopter and early majority market
segment.
87) B
88
947) In 2007, Salesforce.com recognized an emerging market for platform as a service (PaaS) offerings and developed a new competency in delivering software development and deployment tools. This allowed its customers to either extend their existing customer relationship management (CRM) offering or build completely new types of software. This is an example of
A) leveraging existing core competencies to improve current market position.
B) building new core competencies to achieve vertical integration.
C) redeploying and recombining existing core competencies to compete in markets of the future.
D) building new core competencies to create and compete in markets of the future.
88) D
89
948) Which quadrant in the core competence–market matrix is the hardest to pursue?
A) building new core competencies to protect and extend current market position
B) building new core competencies to create and compete in markets of the future
C) leveraging core competencies to improve current market position
D) redeploying and recombining core competencies to compete in markets of the future
89) B
90
949) HydraOne is a large multinational conglomerate. As a single business unit, the company’s stock price is estimated to be $250. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be
$350. In this scenario, what is HydraOne experiencing?
A) experience curve effects
B) learning-curve effects
C) diversification discount
D) economies of scale
90) C
91
950) Ganjaflex Industries is a major multinational conglomerate. Its business units compete in a range of industries, including home appliances, pharmaceuticals, commercial real estate, and plastics manufacturing. Although its largest business unit, which produces kitchen appliances, is among the most profitable in the industry, it generates only 35 percent of the company’s revenues. Which of the following is most likely true of Ganjaflex’s stock price?
A) It is valued at less than the sum of its individual business units.
B) It is valued at greater than the sum of individual business units.
C) It is valued at the exact sum of individual business units.
D) It is consistently lower than the industry average.
91) A
92
951) Betatech Group is the parent company of many related businesses under its banner. Each share of the parent company is quoted at $220. However, if this had to be assessed by adding the stock prices of each of its strategic business units, the value would only be $200 per share. In this scenario, what has Betatech Group created?
A) capital liquidity
B) diversification premium
C) diversification discount
D) demand-pull inflation
92) B
93
952) Hottechi Inc., a large multinational conglomerate, had begun to experience declining revenues. The top management decided it was important for the company to avoid deviating from its core competencies. Thus, a few of the company’s key businesses like energy, telecommunications, and automobiles were centralized, giving the top management more control over them. Also, relatively newer businesses like beverages and food processing were divested. In this scenario, Hottechi is involved in
A) reverse engineering.
B) benchmarking.
C) restructuring.
D) crowdsourcing.
93) C
94
953) The Boston Consulting Group (BCG) growth-share matrix locates a firm’s individual strategic business units (SBUs) in which two dimensions?
A) start-up capital required and stage of industry life cycle
B) relative market share and speed of market growth
C) economic value created and costs incurred
D) amount of debt financing and equity financing
94) B
95
954) In the context of the Boston Consulting Group (BCG) growth-share matrix, if one of the strategic business units of a conglomerate is categorized under “dog,” the management should consider
A) infusing more capital into the strategic business unit.
B) providing more human resources to the business.
C) holding the business until it turns into a “star.”
D) divesting the strategic business unit.
95) D
96
955) Konmatfix Inc., a large consumer electronics company, has divided each product in its portfolio into a separate strategic business unit (SBU). The desktop computer SBU has been experiencing drastic decline in its cash flow, and its market share has also reduced to an insignificant 10 percent. This has been attributed to low growth in the desktop market and the popularity of tablets and laptops. In the context of the Boston Consulting Group (BCG) growth-share matrix, the desktop computer SBU will be categorized under
A) star.
B) question mark.
C) dog.
D) cash cow.
96) C
97
956) Shapiro-Rennart is a large conglomerate. In the context of the Boston Consulting Group (BCG) growth-share matrix, the company’s healthy-living strategic business unit (SBU) has been categorized as a “cash cow,” and its tobacco SBU has been categorized as a “dog.” Which of the following can be inferred from this scenario?
A) While the tobacco SBU operates in a low-growth market, the healthy-living SBU operates in a high-growth market.
B) The management of the company should use the cash inflow from the healthy-living SBU and invest it in the tobacco SBU.
C) While the market share of the company in the healthy-living industry will be high, the market share in the tobacco industry will be low.
D) The tobacco SBU should follow a backward integration strategy, and the healthy-
living SBU should pursue a forward integration strategy.
97) C
98
957) The smartphone division of the large consumer electronics company Streethex has a significant market share in the always-growing cell phone market. If the company invests further into this division, it will be able to reap increased cash flows. In the context of the Boston Consulting Group (BCG) growth-share matrix, the smartphone division of Streethex will be categorized under
A) question mark.
B) star.
C) cash cow.
D) dog.
98) B
99
958) Hatfan Inc. is a large automobile company. In the context of the Boston Consulting Group (BCG) growth-share matrix, the company’s petrol cars strategic business unit (SBU) has been recognized as a “cash cow,” and its hybrid electric cars SBU has been categorized under “star.” Which of the following can be inferred from this scenario?
A) The petrol cars SBU operates in a low-growth market, whereas the hybrid electric cars SBU operates in a high-growth market.
B) The petrol cars SBU will have a relatively low market share in its industry, whereas the hybrid electric cars SBU will have the least market share in its industry.
C) The strategic recommendation for the hybrid electric cars SBU will be to harvest it, whereas for the petrol cars SBU, the company should just maintain it.
D) The petrol cars SBU is more important than the hybrid electric cars SBU in terms of
future growth for the company.
99) A
100
959) Using the Boston Consulting Group growth-share matrix, the managers of Fasehatice International determined that their business unit devoted to personal health monitoring devices was a “star.” Based on this finding, which of the following strategies is likely to produce the best results?
A) Increase investment in the personal health monitoring unit to encourage future growth.
B) Seek to lower costs in the personal health monitoring unit to increase market share.
C) Harvest as much cash flow as possible before shutting the business down.
D) Immediately divest from the personal health monitoring industry.
100) A
101
960) A strategy of will be most beneficial for a firm to enhance its overall corporate performance.
A) unrelated level of diversification
B) single-business level of diversification
C) dominant-business level of diversification
D) related-linked diversification
101) D
102
961) are best described as costs that occur due to political maneuvering by managers to control capital and resource allocation and the resulting inefficiencies stemming from suboptimal allocation of scarce resources.
A) Fixed costs
B) Influence costs
C) Coordination costs
D) Opportunity costs
102) B
103
962) , which are incurred when pursuing a related-diversification strategy, are a function of the number, size, and types of businesses that are linked to one another.
A) Coordination costs
B) Fixed costs
C) Agency costs
D) Network costs
103) A
104
963) Thirty years ago, Raleigh Outdoors created a lightweight, easy-to-erect tent that became a runaway bestseller. Fifteen years later, the tent market reached the maturity stage and sales slowed down. However, by this time, Raleigh Outdoors had developed a strong brand name and continued to lead the market. In the context of the Boston Consulting Group (BCG) growth-share matrix, which of the following describes this scenario?
A) Raleigh was a star that developed into a cash cow.
B) Raleigh was a question mark that developed into a star.
C) Raleigh was a dog that developed into a question mark.
D) Raleigh was a cash cow that developed into a star.
104) A
105
964) Blackzim entered the low-priced digital watch market several years ago. This firm’s earnings have been unsteady but might be growing. In the context of the Boston Consulting Group (BCG) growth-share matrix, Blackzim is a
A) cash cow.
B) star.
C) dog.
D) question mark.
105) D
